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Financial Planning

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*Darryl and Lindsay are a young family expecting their second child. Darryl is a dentist and Lindsay has stayed home with their daughter for the last two years. Living on one income, even a good income, has been a difficult adjustment for the couple. They were concerned about not saving enough for retirement, when to start saving for college, and how to organize their financial life to better prepare for their future. During their first financial planning meeting at FairWay Financial, we talked about their goals for the future.

It was immediately obvious that they needed a comprehensive financial plan and an insurance review to help them protect their assets and prepare for the future.

The first step in financial planning is to provide a comprehensive overview of your personal and financial circumstances. Next, we identify and select the goals you want to achieve. Darryl and Lindsay have significant student loan debt, a mortgage, and two car loans. Darryl makes a high 6-figure income as a dentist, and he has put away $50,000 toward his retirement. The couple would like more breathing room with their monthly expenses, and they want to prioritize investing for the future.

To determine the best course of action, we analyzed their current financial plan. Darryl maxes out his IRA contributions every year, but those are limited. As a solopreneur, we explored his options of setting up a solo 401(k) to allow him to save more toward his retirement and meet his financial goals.

Financial planning has been very one-sided for this family, with only the wage earner contributing towards retirement and covered by life insurance. 

While Darryl had a life insurance policy, Lindsay didn’t. It’s a common mistake not to purchase insurance for the partner who isn’t earning an income. However, Lindsay’s contributions to the family can’t be replaced easily. Lindsay also hasn’t contributed to her retirement savings since she quit her job as a bookkeeper, even though it’s possible for married couples to contribute to a non-working spouse’s IRA.

During our overview of their financial situation, Darryl and Lindsay told us they wanted to prioritize saving for college for their children. Being saddled with student loans has been hard for them, and they want to give their kids a better financial start. When we talked about retirement, Darryl and Lindsay admitted they’d like to retire earlier than at age 65, but they’re not sure it’s even possible. 

Darryl and Lindsay haven’t given much thought to protecting Darryl’s ability to earn an income, and our review revealed that they are underinsured.

When we talked to Darry and Lindsay about insurance, they realized a life insurance policy for Darryl isn’t enough to protect their family. At Darryl’s age, it’s more likely he’ll suffer from a short-term or long-term disability than die, which is why we recommended disability insurance. We also suggested life insurance for Lindsay to cover funeral costs and childcare expenses they don’t currently have.

We also talked about creating an estate plan, which would allow them to designate a guardian for their children should anything happen to both of them. Nobody likes to think about these things, but you only have to create that estate plan once and then review it annually.

The new financial plan includes disability insurance for Darryl and a new life insurance policy for Lindsay. We also created a solo 401(k) to help Darryl max out his retirement contributions and plan to contribute to Lindsay’s IRA. 

Darryl and Lindsay feel confident about their future after we’ve put in place the recommendations. They also feel secure knowing they’re protected with insurance should anything happen to either of them. We even helped them create a payoff schedule for their debts, which will give them significant breathing room within the next two years. 

Personal financial plannering can help you better understand your financial situation, help you choose personal and financial goals, and create an action plan that helps you pursue those goals. When you find a financial planner and work with them towards your financial goals, you can expect to walk away with a comprehensive solution to your financial needs.

A financial planner can help you analyze and optimize your action plan to pursue your financial goals.

*The is a hypothetical example of how Fairway Financial interacts with the community.
This is a fictitious creation by the author to demonstrate our services. None of the names or images belong to actual clients, accounts or relationships.

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